New style ESA and payments of dividends

Help!

Client is in receipt of new style ESA (she is in the support group).

What would be the impact of her receiving a monthly payment of a dividend from a company of which she is a company director? She does not do any work at all for the company as she is not able to (due to her brain injury). Therefore the payment would not be wages for work undertaken. It would definitely be paid as a dividend.

I have checked (and checked) and keep coming to different conclusions.

Any thoughts gratefully received! Thanks

not an expert but - for ESA purposes - a “share dividend” would count as income/employed earnings I think, using ADM Chapter V4 and particularly:-

Establishing a director’s income

V4063 The income of a director can include
1. payments for services as a director or any other employment with the company
2. share dividend
3. debenture interest.
Payments as a director or other employee

V4064 Directors have no legal right to receive payment for their services as a director, but can still be
voted payment. Or they may be entitled to payments under the company’s Articles of Association. Any
payments voted to a director or to which they are so entitled should be regarded as earnings.

See:-

https://assets.publishing.service.gov.uk/media/643d2a9a22ef3b000c66f350/admv4.pdf

However, any amount of such earnings (even if counted) would be subject to the usual limits and exemptions found in the ESA Regs 39 and 76:-

https://www.legislation.gov.uk/uksi/2013/379/contents

Happy to be corrected though

For three reasons I’d say the payments have no effect on ESA(c).

1. It is not payment for work, therefore there is no issue about the claimant’s LCW/LCWRA status under Part 6 of the ESA Regs

2. s3(1)(c) of the WRA 2007 allows regulations to provide for the reduction of ESA when the claimant is in receipt of payments as an office holder.  But the regulations currently only prescribe payments to elected councillors, not company directors

3. In any case, dividends are not payments for holding office, they are simply a return on capital like interest from savings.  I suspect she would be receiving the payment as a shareholder rather than as a director.

PS - posted at same time as Peter - point about dividends in his post noted.  But I think those regulations are only engaged in the first place where the claimant is doing “work”, which this claimant isn’t.  The reason why the earnings rules are not in the Part dedicated to LCW/LCWRA is that there is a sprinkling of references to earnings elsewhere eg sanctions and carers, so a separate Part deals with earnings for all those purposes.

agreed….....

Thanks so much for the detailed responses. Really helpful. I was going round in circles with it! I think I see a way forward now…